Your Last, Best Chance to Buy this Metal on the Cheap

Gold is heating up. And that makes me happy. But I am a glutton for profits. And there’s another dish on the table that looks dee-lish.

This metal that was scorching hot last year — is much hotter than gold. Hotter than copper. Jalapeno-hot!

And now — now you have a chance to buy it on the cheap. This is even though we are barreling toward a supply/demand squeeze that could send it much higher. 

I’m talking about palladium. Look at a performance chart of palladium compared to other metals since the start of 2017 …

Wow! Palladium was up more than 60% before pulling back. Even at its best, copper gained no more than 33% … gold 18% … platinum 14%. Indeed, palladium was the strongest commodity in 2017.

But then palladium led the sell-off, dropping by 13%. This was mostly due to speculation. Investors figured that global auto sales had to cool off. And electric vehicles (EVs) would eat into demand for the internal combustion engines that require palladium. Selling by Exchange-Traded Funds that held palladium made it worse.

But a funny thing happened. On the demand side, sales of diesel-engine cars started to plummet. In Europe, where diesel was the majority of cars, diesel’s market share fell from 51% to 44% from 2015 to 2017.

Drivers switched to gasoline powered cars. And that means more palladium demand, not less.

And the final tallies are in. Palladium supply in 2017 totaled 6.6 million ounces. Demand was 7.23 million ounces. That supply-demand imbalance is why palladium soared last year.

And now, going forward, the real squeeze starts.

Refiner Johnson Matthey published a report on Wednesday. The bottom line, the company said, was “the palladium market will remain in large deficit.”

Can you think of any new palladium mines? There aren’t any! And if auto sales keep rolling along, that is going to squeeze supply mercilessly.

So, let’s look at a chart of the ETFS Physical Palladium Shares (NYSE: PALL). It tracks the metal closely …

You can see that PALL fell through its 50-day moving average. That’s bearish. But recently, it is heading higher on a huge spike in volume. That’s bullish.

Metals are cyclical. And the last time palladium rose from being this oversold, it rallied 22%.

That’s not to say history will repeat itself. But history often rhymes. And in the world’s buffet of metals, palladium almost never goes on sale like this.

So, if you have your own appetite for profits, feel free to put on a bib and tuck in. There is risk, but not enough to upset your stomach.

I believe PALL is a fine way to play this rally. Do your own due diligence before you buy anything.

All the best,
Sean Brodrick